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Are NFTs Becoming the Currency of Modern Commerce?

Published by Fintech Americas on Jan 4, 2023

Latin America accounts for more than 10% of global NFT transactions (Chainalysis). Read the full article and learn more here.

Whether supporting local artists, reselling airline tickets, or making donations, NFTs continue to grow across Latin America. Are they a passing trend or a new form of exchange?

Before diving deeper into the topic, the first thing we need to understand is: what exactly is an NFT?

An NFT (Non-Fungible Token) is a type of cryptographic token that represents a unique or limited asset, meaning it cannot be divided into smaller parts. NFTs can be thought of as unique digital records that cannot be exchanged or subdivided and that allow ownership, access, or identity verification.

Because NFTs operate through Blockchain technology, they are sometimes mistakenly believed to be the same as cryptocurrencies — but they are not.

Both physical money and cryptocurrencies can be traded or exchanged interchangeably. They also hold the same value: one dollar is always worth the same as another dollar; one Bitcoin is always worth the same as another Bitcoin. This fungibility is what makes cryptocurrencies a reliable medium for blockchain transactions.

NFTs, on the other hand, each contain a unique digital signature that makes it impossible for them to be exchanged as identical assets (therefore, they are non-fungible).

If you want to understand where the concept of “non-fungible tokens” came from and why it has become a key reference point in discussions about Web3 and the future of finance, keep reading.

A Brief History of NFTs

Elian Huesca is considered one of the leading experts on NFTs. Passionate about international affairs and disruptive technologies, he has more than six years of experience in the Bitcoin and cryptocurrency industry and is the co-founder of Museo del Caos, Serious and Cool NFT, and Criptonerds.

According to him, the origins of NFTs can be traced back to 1993, when Hal Finney outlined the concept of online cryptographic art (trading cards) as a way of promoting digital money. Finney referenced several concepts that are now common in crypto art, including digital signatures, rarity, and the “back-and-forth” nature of NFT trading.

Since then, there have been numerous experiments within the Blockchain industry using different networks.

“At first, Bitcoin was used with something known as colored coins, which allowed identifiers to be created using the Bitcoin blockchain. Later, Namecoin became one of the first protocols to create NFTs, followed by Counterparty. These protocols are no longer widely used today, but they undoubtedly hold an important place in the historical development of NFTs,” explains Huesca.

NFTs truly captured mainstream attention for the first time in March 2021, when the crypto artwork First 5000 Days, created by Beeple, became the world’s most expensive NFT, selling for $69 million.

NFTs in Latin America

According to research from Chainalysis, the region is responsible for just over 10% of all global NFT transactions. These activities are not limited to high-profile industries; local NFT businesses are also working to drive innovation in more traditional sectors.

For example, in August 2022, Argentine low-cost airline Flybondi began selling 2.5 million airline tickets through TravelX, a marketplace for tokenized travel assets. These tickets are tokenized when purchased and converted into non-fungible tokens known as NFTickets.

NFTs: Beyond the Metaverse and Digital Art

The art world was one of the first catalysts for the NFT industry, as discussed earlier in this article. However, the information contained within an NFT is not limited to digital artwork. It can represent any document that requires legal validity and a tamper-proof timestamp.

Property titles are a clear example of how this technology can be applied in the physical world:

“Today in Mexico, you have to pay between 5% and 6% of the property value to a notary who validates and signs off on the transaction. This could easily become an NFT capable of validating the identity and information behind that purchase,” says NFT expert Elian Huesca.

Brands Are Embracing NFTs

Major global brands such as Nike, Pizza Hut, and Taco Bell have increasingly embraced NFTs as a way to innovate and create new experiences for customers.

In Latin America, examples include Chiefs Group, which launched a blockchain platform for talent management in the region featuring NFTs valued at R$11.3 million. In the real estate sector, NFTs have also begun to be used as collateral for property financing. In March 2022, Netspaces, creator of a digital property platform in Brazil, completed the country’s first NFT-backed financing transaction.

6 Key Reflections on NFTs

Although NFTs cannot yet be considered a true currency for modern commerce, they are setting a precedent for the businesses of the future. Below are several important considerations and recommendations regarding NFTs according to expert Elian Huesca:

1. Don’t invest in NFTs — build businesses with them. Explore how this technology can play an innovative role in what you are already doing. Whether in art or another industry, it is worth considering how NFTs could be applied.
2. NFT markets are highly illiquid. Supply is virtually unlimited while demand remains limited. Therefore, as an investment vehicle, NFTs are risky because there is often insufficient liquidity to convert them back into cash or cryptocurrency.
3. NFTs have become a catalyst for innovation in database structures. They represent advances in how information can be stored in centralized or decentralized ways and how different database systems can communicate with one another.
4. Certain social networks have become key hubs for NFT entrepreneurs. Twitter/X remains essential, but LinkedIn is equally important. It is impressive to see how many professionals are becoming involved in these technologies and exploring ways to leverage them.
5. Privacy and transparency remain major challenges. Maintaining a high degree of transparency that still allows information to be verified will be a significant regulatory challenge moving forward.
6. Standardization and interoperability will become critical topics in the future. These markets are still expanding and remain in a very early stage of development, where technologies are constantly evolving and adapting.

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